Chapel Street Vacancies Hit a Long-Term Low

Vacancy rates have further decreased in Chapel Street, South Yarra, with fashion labels and boutiques again seeing huge upside in arguably Australia’s most famous shopping strip.

An oft-cited bellwether for changes in the retail environment, Chapel Street saw vacancies spike to more than 1 in 5 shops on the eve of the pandemic. But that vacancy rate has been nearly halved in the past 2 years, according to Fitzroys’ latest Walk The Strip report, falling to 18.7% in 2021 and now to a long-term low of 10.7%, amid landlords meeting the market on rent, a demographic shift and a spate of new commercial and residential developments.

The fall in vacancy is in line with the report’s findings that the average vacancy rate across 36 of Melbourne’s key shopping strips came down from 10.3% in 2021 to a long-term low of 6.7% in 2022.

Chapel Street’s recovery over the past 12 months has been driven by specialty operators, with the proportion of fashion labels, boutiques and footwear stores lifting by 8.0% to 52.4% – a return to pre-COVID levels.

Fitzroys Senior Manager - Agency Lewis Waddell has just negotiated multiple leases along the strip. Those include 505 Chapel Street to fashion retailer Casa Amuk, which is moving from the Prahran part of the strip in a deal worth $550 per sqm net, and men’s clothing label Calibre at 483 Chapel Street, from where it will run a clearance outlet in addition to its recently leased 543-545 Chapel Street site, in another deal struck by Waddell. He has also just leased 587 Chapel Street to Portobello Jewellers, which has sites Camberwell and in Greensborough.

Other recent fashion entrants include Saba and Gorman’s new flagships at 576-584 Chapel Street, as well as Anna Thomas, which will soon open a new store in the strip, shoe retailer Zomp, and Eternal Bridal, which leased 517 Chapel Street in a deal by Waddell that marked the tenant’s notable move from High Street, Armadale – a reversal of the trend that emerged in the mid-2000s, when some Chapel Street retailers began to make the move to
the then-more affordable High Street. Another bridal studio, Rajashree, has just opened at 448 Chapel Street.

These moves have followed the openings of Joe Bananas and M.J. Bale, also in deals by Waddell. Meanwhile, while women’s fashion boutiques Lilita Martin opened at 437 Chapel Street, and LTRO Studio and Leaterials opened at 563 Chapel Street, and retailer Landes Warehouse optimised its position with a move to 485 Chapel.

According to Walk the Strip, the Melbourne-wide trend of vacancies decreasing to below pre-COVID levels was led by cafés, eateries, restaurants and bars taking up space across the suburbs, and Chapel Street, South Yarra saw its proportion of food and beverage tenants increase to a long-term high of 24.6%. Newly opened 4-level Italian bar and restaurant Stella is among the new hospitality operators, and Waddell leased 481 Chapel Street to Night Owl Bar as well as the 300sqm space at Shop 16, The Colonnade at 560 Chapel Street to South Australian burger chain New York Burger Co, while Black Magic Bar has set up at 364 Chapel Street, new café Boy opened has opened at number 421 and Dukang Restaurant & Bar at 363.

Waddell said there was a 6 to 12-month period before COVID of informing property owners about cyclical changes in the market and this has flowed through to leasing activity.

“We’re seeing deals transact. Landlords are meeting the market, and tenants are finding the rent and demographic opportunities on Chapel Street so appealing we’ve gone from tenants to optimising their position within the area to now actually moving from a different location altogether to get into the strip.

“South Yarra offers the fundamentals of a strong, established catchment in an affluent and easily accessible area, and now they’re supported by more affordable rentals and a strong residential and commercial development pipeline.”

Waddell noted that the new and prospective tenants were attracted to the $1.5 billion redevelopment of the Jam Factory precinct by Newmark Capital, Gurner and Qualitas, and additions to the immediate day-to-day catchment thanks to new office builds at 627 Chapel Street and at 11 Wilson Street, and Greystar developing Australia’s largest build-to-rent project in the adjoining Forrest Hill precinct.

Waddell has also just leased 538 Chapel Street to art gallery Lionia Art, which will be moving from Black Rock, and the former Flight Centre site at 433 Chapel Street to dental group D-Vine Smiles, at $600/sqm for the ground floor retail space. Big 4 bank Westpac, meanwhile, has also renewed its lease at 371-375 Chapel Street. Other new entrants into the strip include pilates and yoga studio FS8 at 447 Chapel Street, as well as European doors and handles retailer Architrend, Élever Property Group, ForRest Thai Massage and Organique Wellness & Beauty Bar.

Melbourne CBD Restaurant And Retail Freehold Sells For $32.6
A 2-level building on Lonsdale Street in the Melbourne CBD has sold to an offshore private investor for $32.6 million, on a sub-3% yield.

Comprising shops and a restaurant, 272-282 Lonsdale Street was sold by a local family who bought the property in 2003 for $5.6 million.

The 817sqm building is fully leased to 6 tenants, returning a combined $1,002,565pa, with the lease profile providing for vacant possession in 2027. It is on a 413sqm site.

Dan Murphy’s Sells On 2.94% Yield
A private consortium has paid $14.75 million for a freestanding Dan Murphy’s-leased building, on a 2.94% yield.

The Pakenham store at 8 Portobello Road is on a 1.216ha site with 83 car parks and additional vacant land. Dan Murphy’s has a 15-year lease with options to 2056 currently returning $433,559pa.

The vendor paid $3.658 million for the block in late 2008.

The comes hot on the heels of a private Melbourne family paying $21.1 million for the Dan Murphy’s property in Malvern, on a 3.48% yield.

More Growth For Melbourne’s Build-to-Rent Market
US property giant Greystar has bought sites in Fitzroy and Kensington for its next build-to-rent projects in Melbourne.

Greystar has lodged planning documents for 400-unit project with an end value of about $350 million, at 352-400 Macaulay Road, which it contracted to acquire earlier this year for reported price of around $50 million.

It has also paid a reported circa $32 million for the 2,556sqm site at 155 Johnston Street in Fitzroy, where it plans to build 150 units with a likely end value of $150 million.

Greystar’s other Melbourne projects include a $500 million dual-tower South Yarra development with 625 apartments, and another $500 million project in South Melbourne that will have 700 units.

Melbourne has the bulk of Australia’s build-to-rent projects. Active developers include Mirvac, which has projects next to the Queen Victoria Market and in Brunswick, Gurner, with projects in Southbank and on St Kilda Road, Oxford and Indi, who have a 702-apartment project in Footscray, and Assemble Communities, which has multiple projects in Kensington.